CQ TODAY ONLINE NEWS
June 24, 2009 – 12:05 a.m.
Health Care Overhaul: The Public Option Debate
By Madison Powers, CQ Guest Columnist
Knowledgeable observers have long said that the public option — some form of government-sponsored alternative to existing private insurance plans — is one of the two main stumbling blocks to serious health care overhaul.
The second major obstacle is the unanswered question of how to pay for a guarantee of universal coverage for all Americans and the cost of including the almost 50 million who are now uninsured. More on that point in a moment.
In an earlier column immediately after the insurance industry lobby promised cooperation with President Obama’s overhaul efforts, I argued that this was not a commitment to be trusted and that the reasons for doubt were based on the well-known (in Washington) fact that a public option would turn out to be a deal-breaker.
A public option can take many forms and the pros and cons depend heavily on the details. In broad stokes, however, advocates such as Howard Dean like to press the analogy to the highly popular Medicare program. The idea is that individuals get to choose their own doctors and hospitals in the same way they can under traditional private sector insurance, and they get “indemnified” for costs by the sponsoring agency. As Obama highlights at every opportunity, if you’re satisfied with your current insurance, you can keep it.
The overhaul plan is billed quite smartly as simply adding options. Americans like choice. As anyone who witnessed the media campaign against the Clinton plan will recall, the threat of taking away the options currently available to those who saw themselves as doing reasonably well — under the admittedly dysfunctional system — trumped any moral imperative to risk any possible sacrifice for the sake of those who are left out completely.
Thus far, the public seems to have responded well to the administration’s near-perfect pitch. The New York Times/CBS poll this week shows that 76 percent of Americans think that a public option is an important part of any reform package that might be passed, while only 20 percent think it’s not important.
The Obama narrative thus deflected the initial thrust that doomed the Clinton plan. The promise of more choice pre-empted the familiar threat of overhaul ideas that threaten fewer choices as the price to pay for fairness to those excluded. Score one for the Obama team.
But Republican lawmakers are opposed categorically, and many key Democratic senators are noticeably anxious about supporting a public option.
What’s the problem with the public option?
One obvious downside to making the comparison to Medicare is the fact that it’s not financially stable. It’s great that the Medicare analogy avoids the “restriction of choice” problem that the infamous “Harry and Louise” television ads capitalized upon so effectively in 1993, but the comparison only serves to remind critics that Medicare inherits and reproduces the cardinal sins of traditional private insurance mechanisms.
The problem is that the one who pays the bill has little say in deciding what gets paid for. All the important decisions get made by doctors and patients. The insurers — whether they are private or public entities — are relatively impotent in their ability to control costs. So the opponents of the public plan get the right to ask how the public plan is likely be to be anything more than a new sponsor for a proven bad idea borrowed from the private sector.
Defenders of the public plan have the burden of showing how their plan won’t succumb to the same, well-known failings of traditional insurance plans that leave all the essential financial judgments to doctors and patients. They have to show how cost savings can be generated when everyone knows that Medicare is an exemplar of how not to contain costs.
The obvious rejoinder is that Obama plans to ration care — they are going to put government bureaucrats between you and your doctor. This claim is but an updated variation on the central theme of the opponents of the Clinton plan. In 1994, the claim was that Clinton would put managed care bureaucrats between patients and their doctors. Now the claim is that someone from the federal government would do the same.
Defenders of the public option have to find a new way of arguing for how savings are likely.
Thus far, the defenses are quite lame. The claim that we can save loads of money by emphasizing prevention has been widely discredited among health policy experts. Years ago, the seminal work by Louise Russell discredited the otherwise intuitively plausible idea that prevention is cheaper than cure. More recent empirical research confirms that as much as 80 percent of preventive interventions — e.g., drugs designed to address risk factors such as high cholesterol — actually increase health care expenditures.
Also problematic are claims that electronic, error-preventing records systems, standardized claim forms that the insurance industry finally got around to endorsing at the metaphorical point of the gun, and disease-specific medical treatment programs (that Gov. Jeb Bush tried with no clear evidence of success for Medicaid enrollees in Florida) can save substantial money.
But the bigger point is Obama’s advertised assertion that the public program will keep the private market honest. How is that going to happen? Intuitively, we all know there’s waste, but there are constituencies on behalf of nearly every kind of waste we can imagine.
There are wastes — transactions costs, as economists call them — associated with a system of marketing, claims vetting, and other aspects of administration that public plans of the sort that Canada doesn’t have. To the extent that we keep private plans honest in this way, defenders of the private sector plans complain that Obama wants to create an unlevel playing field.
But if we concede that the public plan ought to compete on the same skewed playing field that current plans enjoy, then the public option is no benefit at all. Sen. Charles E. Schumer , D-N.Y., has come up with an ingenious — but ultimately counterproductive — set of proposals designed to defang the public option.
Either the public option really is the Trojan Horse the industry claims that it is, or it’s not worth pursuing.
The whole point of the public option is to provide a demonstration of how we can do better by abandoning reliance on a system in which costs are by design uncontrollable.
The primary alternative favored by the insurance industry — some sort of voucher system — suffers from the same problem, but it is a potential bonanza for the industry.
Suppose that we opted for a voucher plan that allows everyone to purchase insurance from private companies? As part of that plan, we offer public subsidies to those who could not afford it. The insurance industry gets new customers with a dependable source of funds for an expanded market. In bad economic times when the percentage of the uninsured population is high, the industry has a guaranteed source of stabilizing revenue. This would make the industry’s commitment to universal coverage unshakable — and quite convenient.
The very idea of a public plan, by contrast, not only provides unwelcome competition of the sort that exposes the fundamental reasons not to rely so heavily on the mirage of market competition, but it also cuts off an incredible opportunity for the industry to pick the public pocket for their own advantage.
All of this explains some important grounds for industry opposition to a public plan. But what about the 59 Democratic senators? What accounts for their solicitous attitude toward the arguments of the critics of a public plan?
One fact of life known to everyone who has ever run an organization of any kind is that what matters is not how many employees you have but the number of full-time employees (FTEs). The Democrats may have 59 — or perhaps 60 members very shortly — but if you look at the number of Democrats who have more than a 70 percent progressive voting record judged by one representative measure at least 11 are fragile supporters at best, and all of the unreliable Democratic votes are in states where Republicans hold an advantage.
The Democrats just don’t have enough FTEs to get the job done in quite the way it needs to be done to control costs through a robust public option.
Madison Powers is senior research scholar, Kennedy Institute of Ethics, Georgetown University. His columns appear periodically in CQ Politics.
Comments
Show your support for the public option by adding your name to the TV ad at http://www.wewantthepublicoption.com/
As I hear it, insurance company bureaucrats now stand between doctors and their patients.
I would contend that the 76 % of Americans who think a public option is important have zero knowledge and zero understanding of the cost and the ramifications of such and option. The proposed healthcare reform will be disastrous for our economy, individual choice and the health care system as a whole. Forget the rhetoric and propaganda regarding millions of "uninsured" the data does not support the rhetoric. See: Health Care Compromise - Addressing the Uninsured and Problems Facing Health Care Doctors across the country are opting out of Medicare and/or not accepting new patients. Why? Because Medicare hold down prices by underpaying for services. A national health plan will do exactly the same thing. The result: Fewer choices of doctors, lower reimbursement rates for doctors, and hours spend on hold trying to resolve simple issues. Don't let them fool you with "more choice" the part they don't tell you is certain doc won't participate in certain plans. So you have the choice of the plan but not who accepts your choice. Furthermore, Medicare only pays 80% with deductible rising each year. We would still need Medigap or similar insurance. How does that "big picture" eliminate waste in the healthcare system if the system is still necessary? I don't have time to explain everything but this is a Very bad idea. Not to mention higher taxes for everyone including taxes on current health benefits. Disaster in the making.
POST A COMMENT
Oops! The following errors must be addressed: